Pradhan Mantri Vaya Vandana Yojana – LIC plan 8% guaranteed pension

In the budget 2017 speech, the finance minister had announced that LIC will come up with a new pension scheme for senior citizens with guaranteed 8% return. On 4th May 2017, his words turned into reality and LIC announced Pradhan Mantri Vaya Vandana Yojana (PMVVY)

The PMVVY is an immediate pension plan scheme, similar to the varishtha Pension Bima Yojana launched in 2014-15. It’s a limited period scheme where you need to invest a lump sum amount and you will start receiving the pension income as per the chosen payment mode.

This post is about the Pradhan Mantri Vaya Vandana Yojana details, features, and review

PMVVY is an immediate pension plan with guaranteed return of 8% compounded monthly, which means the effective annual rate is 8.30%. This plan is to answer and take care the requirement of monthly income for senior citizens. Managed by LIC and backed by the government, you can depend on it for safety and regularity of monthly pension aspects.

Other important features of this government pension scheme are as below:

This plan is meant for senior citizens aged 60 years and above. No upper age limit

The tenure of the product is 10 years.

The interest rate is fixed and assured at 8% monthly or 8.30% annually.

You can ask for pension in Monthly/Quarterly/Half Yearly or Annual Mode.

There is a lock-in period of 10 years, but in the case of critical/Terminal Illness of self or spouse, you can withdraw the money prematurely. In this case, Surrender value would be 98% of the purchase price.

The Plan is open for subscription from 04 May 2017 to 03 May 2018

The maximum limit of pension is applicable on the family as a whole. Means if more than 1 member of the family has bought this plan, the monthly/annual pension to a family should not be more than Rs 5000/60000 in total.

No tax benefit on premium paid, and also the pension will be taxable.

On maturity of PMVVY, the policy holder will get the complete Invested amount (Purchase Price) back.

In the case of the demise of the policyholder in between the policy term, the purchase price will be refunded to the nominee.

PMVVY is a very simple pension plan. You invest the money and you will start getting a pension from at the end of the period as per the chosen mode of payment. Means if you have chosen monthly then the first pension installment will start from next month, if mode chosen is annual then you will get the first pension from next year.

Since PMVVY is completely taxable and with long lock-in period, then one should be very sure before putting their money into it. Why am I saying this because any scheme announced by LIC always attracts a lot of eyeballs and without understanding the suitability of the product, people tend to invest in that. People take the tag line – “LIC

People take the tag line – “LIC hai to kahi aur kyo jana” very seriously.

Senior citizens can earn 8.4% in Post office senior citizen saving scheme, though that is not a 10 years product, who knows you may find better rates after 5 years. Possible? There are many Secured NCDs (though not backed by the government) coming in the market time and again and one can take advantage of the high returns they offer, some highly rated corporate FDs are also offering 8+% kind of returns to senior citizens.

(Also Read: What is equity – It’s much more than just stock market Investments)

Overall the unique thing in Pradhan Mantri Vaya Vandana Yojana is only 8% rate of Interest which is normally not visible anywhere at this moment unless you try to find it. Otherwise, it’s a simple immediate annuity plan but that too with limited benefit as there is upper limit of Pension and Investments into it.

He’s MBA ( Finance) gold medalist, a CERTIFIED FINANCIAL PLANNER and SEBI Registered Investment adviser. An ex banker , having a decade long experience in financial services industry he manages clients across the globe. He is a regular contributor to various leading Media and publication houses. He keeps on writing for Moneycontrol, Dainik bhaskar, Business standard etc. He also delivers training on Various personal finance topics to various corporate houses. You may get in touch with him at [email protected]

5 COMMENTS

Policy period should be upto the age of 80/85 and not for just 10 years period.
Fixed income from this LIC Policy should be made available to the couple,separately as their earning potential in 70s and beyond will be negligible or possible only for a few

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Manikaran Singal is the founder and Chief financial planner at Good Moneying Financial Solutions. He is a CERTIFIED FINANCIAL PLANNER CM and SEBI registered Investment adviser (Regd no. INA 100001620). He’s having more than 12 years of experience in financial services space. More...